11 tax breaks available only to military families

Fighting to protect our nation's sovereignty can be extremely
trying, not only on those who serve in the military but also on
their families.

Fortunately, there are many ways the US government shows its
appreciation for the sacrifices made by military men and women
including, most notably, in tax benefits.

Military members are eligible to receive a number of tax and
retirement breaks that regular civilians don't qualify for.

From selling your home to saving for retirement to filing your
taxes, here are 11 tax benefits that military families have
available to them.

1. Retirement savings. Members of the military
are allowed to put tax-free combat pay in their Thrift Savings
Plan (TSP) or an IRA. For those in a combat zone, the total of
allowable contributions to the TSP (Roth and traditional) is
increased to $53,000. Money that goes into your traditional TSP
tax-free will not be taxed when you withdraw the money, but you
will need to pay taxes on earnings. Contributions to the Roth TSP
are still capped at $18,000; at retirement, withdrawals of
contributions and earnings come tax-free.

If you plan on rolling over a traditional TSP with tax-free
contributions, it may be best to create two separate rollover
accounts: one for taxable contributions and earnings and one for
tax-free assets.

2. Filing extensions. If you’re serving in the
military you may qualify for a deadline extension for several tax-related
actions, including filing returns, paying taxes, making claims
for refunds, and contributing to IRAs.

3. Support for spouses. Before 2009, military
spouses were typically required to pay income taxes to the states
where their spouses were stationed. But thanks to the Military
Spouses Residency Relief Act, military spouses only have to pay
income taxes to the state they legally reside in.

4. Remote filing. Joint returns usually need to
be signed by both spouses. But if you’re away from home and
serving in the military, your spouse can be given power of
attorney to file a joint return on your behalf. If your spouse is
unable to sign the return because he or she is serving in a
combat zone or is performing qualifying service outside of a
combat zone, and you do not have power of attorney or other
statement, you can sign for your spouse. Attach a signed
statement to your return that explains that your spouse is
serving in a combat zone.

5. Selling your home. Taxpayers can often avoid
paying capital-gains taxes on the sale of a home if they owned
and used it as their main residence for at least two of the five
years before the sale. This rule can be used to exclude up to
$250,000 in gains for individuals or $500,000 for married
couples.

Lucky for military members, the IRS provides flexibility.
Military members can suspend the five-year test period for up to
10 years while on qualified extended duty (50 miles from home for
90 days or more). To learn more about the rules and if they apply
to your situation, visit the IRS website or consult a professional tax
adviser.

6. Moving deductions. Moving is expensive.
Moving every few years — as many military families are forced to
do — can be even pricier. That’s why the IRS allows military
members to deduct "reasonable un-reimbursed expenses" incurred
while relocating your family and waives the time and distance
test required for civilians to deduct moving expenses.

7. Transition assistance. If you're
transitioning back to civilian life, you could deduct certain
costs associated with looking for a new job. Qualified expenses
may include travel, resume preparation fees, and outplacement
agency fees.

8. Travel deductions. If you're called more than
100 miles away from home to perform Reserve duties you are
eligible to deduct certain un-reimbursed travel expenses.

9. Uniform costs. If you’re prohibited from
wearing certain uniforms when off duty — a rule most commonly
applied to reservists — you may be able to deduct the costs to
buy and maintain those uniforms. But keep in mind that you're
required to reduce your expenses by the amount of any uniform
allowance or reimbursement you receive.

10. Waived penalties. A call to active duty can
create a financial hardship for reservists. If the reservist
withdraws funds from his retirement savings to cover expenses
during this time, the IRS can provide accommodation.

11. On base. Tax assistance to service members
and their families is often provided through the Volunteer Income Tax Assistance Program.
Military members have free on-base access to IRS trained and
certified tax preparers that are knowledgeable of
military-specific tax issues.

12. Heroes Earnings Assistance and Relief Tax Act of 2008
(HEART Act). The HEART Act allows the eligible
beneficiary of a military death gratuity or SGLI death benefit to
contribute either to a Roth IRA or Coverdell Education Savings
Account (ESA) as a qualified rollover contribution. The eligible
beneficiary must complete the contribution within one year of
receiving the death gratuity or SGLI death benefit.

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No Department of Defense or government agency
endorsement.

Images do not represent any endorsement, expressed or
implied, by the Department of Defense or any other United States
government age.

The contents of this document are not intended to be, and are
not, legal or tax advice. The applicable tax law is complex, the
penalties for non-compliance are severe, and the applicable tax
law of your state may differ from federal tax law. Therefore, you
should consult your tax and legal advisers regarding your
specific situation.